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EXHIBIT 10.5
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "Agreement"), dated as of
__________________, is made by and between Sunterra Corporation (formerly known
as Signature Resorts, Inc.), a Maryland corporation, hereinafter referred to as
"Company," and ________________, an [employee and consultant] of the Company,
hereinafter referred to as "Optionee":
WHEREAS, the Company wishes to afford the Optionee the
opportunity to purchase shares of its $.01 par value Common Stock; and
WHEREAS, the Company wishes to carry out the Plan (the terms of
which are hereby incorporated by reference and made a part of this Agreement);
and
WHEREAS, the Committee, appointed to administer the Plan, has
determined that it would be to the advantage and best interest of the Company
and its shareholders to grant the Option provided for herein to the Optionee as
an inducement to enter into or remain in the service of the Company or its
Subsidiaries and as an incentive for increased efforts during such service, and
has advised the Company thereof and instructed the undersigned officers to issue
said Option;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Agreement, they
shall have the meaning specified below unless the context clearly indicates to
the contrary. The masculine pronoun shall include the feminine and neuter, and
the singular the plural, where the context so indicates.
Section 1.1 - Board
"Board" shall mean the Board of Directors of the Company.
Section 1.2 - Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.3 - Committee
"Committee" shall mean the Compensation Committee of the Board,
or a subcommittee of the Board, appointed as provided in Section 9.1 of the
Plan.
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Section 1.4 - Common Stock
"Common Stock" shall mean the common stock of the Company, par
value $.01 per share, and any equity security of the Company issued or
authorized to be issued in the future, but excluding any warrants, options or
other rights to purchase Common Stock. Debt securities of the Company
convertible into Common Stock shall be deemed equity securities of the Company.
Section 1.5 - Company
"Company" shall mean Sunterra Corporation, a Maryland
corporation.
Section 1.6 - Director
"Director" shall mean a member of the Board.
Section 1.7 - Employee
"Employee" shall mean any officer or other employee (as defined
in accordance with Section 3401(c) of the Code) of the Company, or of any
corporation which is a Subsidiary.
Section 1.8 - Exchange Act
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
Section 1.9 - Fair Market Value
"Fair Market Value" of a share of Common Stock as of a given date
shall be (i) the mean between the highest and lowest selling price of a share of
Common Stock on the principal exchange on which shares of Common Stock are then
trading, if any, on such date, or if shares were not traded on such date, then
on the closest preceding date on which a trade occurred, or (ii) if Common Stock
is not traded on an exchange, the mean between the closing representative bid
and asked prices for the Common Stock on such date as reported by NASDAQ or, if
NASDAQ is not then in existence, by its successor quotation system; or (iii) if
Common Stock is not publicly traded, the Fair Market Value of a share of Common
Stock as established by the Committee acting in good faith.
Section 1.10 - Option
"Option" shall mean a non-qualified stock option granted under
this Agreement and Article III of the Plan.
Section 1.11 - Optionee
"Optionee" shall mean an Employee or consultant granted an Option
under this Agreement and the Plan.
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Section 1.12 - Plan
"Plan" shall mean The 1996 Equity Participation Plan of Sunterra
Corporation, formerly known as Signature Resorts, Inc., as amended.
Section 1.13 - Rule 16b-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the
Exchange Act, as such Rule may be amended from time to time.
Section 1.14 - Secretary
"Secretary" shall mean the Secretary of the Company.
Section 1.15 - Securities Act
"Securities Act" shall mean the Securities Act of 1933, as
amended.
Section 1.16 - Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
Section 1.17 - Termination of Consultancy
"Termination of Consultancy" shall mean the time when the
engagement of Optionee as a Consultant to the Company or a Subsidiary is
terminated for any reason, with or without cause, including without limitation,
resignation, discharge, death or retirement; but excluding terminations where
there is a simultaneous commencement of employment with the Company or any
Subsidiary. The Committee, in its absolute discretion, shall determine the
effect of all matters and questions relating to Termination of Consultancy,
including, but not by way of limitation, the question of whether a Termination
of Consultancy resulted from a discharge for good cause, and all questions of
whether particular leaves of absence constitute Terminations of Employment.
Notwithstanding any other provision of this Plan, the Company or any Subsidiary
has an absolute and unrestricted right to terminate a consultant's service at
any time for any reason whatsoever, with or without cause, except to the extent
expressly provided otherwise in writing.
Section 1.18 - Termination of Employment
"Termination of Employment" shall mean the time when the
employee-employer relationship between the Optionee and the Company or any
Subsidiary is terminated for any reason, including, but not by way of
limitation, a termination by resignation, discharge, death, disability or
retirement; but excluding (i) terminations where there is a simultaneous
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reemployment, continuing employment of an Optionee by the Company or any
Subsidiary, (ii) at the discretion of the Committee, terminations which result
in a temporary severance of the employee-employer relationship, and (iii) at the
discretion of the Committee, terminations which are followed by the simultaneous
establishment of a consulting relationship by the Company or a Subsidiary with
the former employee. The Committee, in its absolute discretion, shall determine
the effect of all matters and questions relating to Termination of Employment,
including, but not by way of limitation, the question of whether a Termination
of Employment resulted from a discharge for good cause, and all questions of
whether particular leaves of absence constitute Terminations of Employment.
Notwithstanding any other provision of this Plan, the Company or any Subsidiary
has an absolute and unrestricted right to terminate an Employee's employment at
any time for any reason whatsoever, with or without cause, except to the extent
expressly provided otherwise in writing.
ARTICLE II
GRANT OF OPTION
Section 2.1 - Grant of Option
In consideration of the Optionee's agreement to remain in the
employ of (or consult for) the Company or its Subsidiaries for a period of at
least ___ years after the commencement of Executive's employment with the
Company and for other good and valuable consideration, on the date hereof the
Company irrevocably grants to the Optionee the option to purchase any part or
all of an aggregate of ___________________________________________ shares of its
$.01 par value Common Stock upon the terms and conditions set forth in this
Agreement.
Section 2.2 - Purchase Price
The per share purchase price of the shares of stock covered by
the Option shall be $_____, which is the per share Fair Market Value of such
shares as of the date hereof.
Section 2.3 - Consideration to Company
In consideration of the granting of this Option by the Company,
the Optionee agrees to render faithful and efficient services to the Company or
a Subsidiary, with such duties and responsibilities as the Company shall from
time to time prescribe, for a period of at least _______ years after the
commencement of Executive's employment with the Company. Nothing in the Plan or
this Agreement shall confer upon any Optionee any right to continue in the
employ of, or as a consultant for, the Company or any Subsidiary, or as a
director of the Company, or shall interfere with or restrict in any way the
rights of the Company and any Subsidiary, which are hereby expressly reserved,
to discharge the Optionee at any time for any reason whatsoever, with or without
good cause[, subject to the terms of the Executive's Employment Agreement with
the Company.]
Section 2.4 - Adjustments in Option
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(a) In the event that the outstanding shares of the stock subject
to the Option are changed into or exchanged for a different number or kind of
shares of the Company or other securities of the Company, or of another
corporation, by reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock split up, stock dividend or
combination of shares, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares as to which the Option, or portions
thereof then unexercised, shall be exercisable, to the end that after such event
the Optionee's proportionate interest shall be maintained as before the
occurrence of such event. Such adjustment in the Option may include any
necessary corresponding adjustment in the Option price per share, but shall be
made without change in the total price applicable to the unexercised portion of
the Option (except for any change in the aggregate price resulting from
rounding-off of share quantities or prices). Any such adjustment made by the
Committee shall be final and binding upon the Optionee, the Company and all
other interested persons.
(b) Notwithstanding the foregoing, in the event of such a
reorganization, merger, consolidation, recapitalization, reclassification, stock
split up, stock dividend or combination, or other adjustment or event which
results in shares of Common Stock being exchanged for or converted into cash,
securities or other property, the Company will have the right to terminate the
Plan as of the date of the exchange or conversion, in which case all options,
rights and other awards under this Plan shall become the right to receive such
cash, securities or other property, net of any applicable exercise price.
(c) In the event of a "spin-off" or other substantial
distribution of assets of the Company which has a material diminutive effect
upon the Fair Market Value of the Company's Common Stock, the Board may in its
discretion make an appropriate and equitable adjustment to the Option to reflect
such diminution.
ARTICLE III
PERIOD OF EXERCISABILITY
Section 3.1 - Commencement of Exercisability
(a) Subject to Section 5.7, the Option shall become exercisable
in __________ cumulative installments as follows:
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(b) No portion of the Option which is unexercisable at
Termination of Employment or Termination of Consultancy, as applicable, shall
thereafter become exercisable.
Section 3.2 - Duration of Exercisability
The installments provided for in Section 3.1 are cumulative. Each
such installment which becomes exercisable pursuant to Section 3.1 shall remain
exercisable until it becomes unexercisable under Section 3.3.
Section 3.3 - Expiration of Option
The Option may not be exercised to any extent by anyone after the
first to occur of the following events:
(a) The expiration of ten (10) years from the date the Option was
granted; or
(b) The time of the Optionee's Termination of Employment or
Termination of Consultancy unless such Termination of Employment or Termination
of Consultancy, as applicable, results from his death, his retirement, his
disability or his being discharged not for "Cause" (as defined in Section 5(c)
of the Employment Agreement dated the date hereof between Optionee and the
Company); or
(c) The expiration of three (3) months from the date of the
Optionee's Termination of Employment or Termination of Consultancy by reason of
his retirement or his being discharged not for "Cause," unless the Optionee dies
within said three-month period; or
(d) The expiration of one (1) year from the date of the
Optionee's Termination of Employment or Termination of Consultancy by reason of
his disability; or
(e) The expiration of one (1) year from the date of the
Optionee's death; or
(f) The effective date of either the merger or consolidation of
the Company with or into another corporation, the exchange of all or
substantially all of the assets of the Company for the securities of another
corporation, the acquisition by another corporation or
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person of all or substantially all of the Company's assets or eighty percent
(80%) or more of the Company's then outstanding voting stock, or the liquidation
or dissolution of the Company. At least ten (10) days prior to the effective
date of such merger, consolidation, exchange, acquisition, liquidation or
dissolution, the Committee shall give the Optionee notice of such event if the
Option has then neither been fully exercised nor become unexercisable under this
Section 3.3.
ARTICLE IV
EXERCISE OF OPTION
Section 4.1 - Person Eligible to Exercise
During the lifetime of the Optionee, only he may exercise the
Option or any portion thereof. After the death of the Optionee, any exercisable
portion of the Option may, prior to the time when the Option becomes
unexercisable under Section 3.3, be exercised by his personal representative or
by any person empowered to do so under the Optionee's will or under the then
applicable laws of descent and distribution.
Section 4.2 - Partial Exercise
Any exercisable portion of the Option or the entire Option, if
then wholly exercisable, may be exercised in whole or in part at any time prior
to the time when the Option or portion thereof becomes unexercisable under
Section 3.3; provided, however, that each partial exercise shall be for not less
than one thousand (1,000) shares and shall be for whole shares only.
Section 4.3 - Manner of Exercise
The Option, or any exercisable portion thereof, may be exercised
solely by delivery to the Secretary or his office of all of the following prior
to the time when the Option or such portion becomes unexercisable under Section
3.3:
(a) Notice in writing signed by the Optionee or the other person
then entitled to exercise the Option or portion, stating that the Option or
portion is thereby exercised, such notice complying with all applicable rules
established by the Committee or the Board; and
(b) (i) Full payment (in cash) for the shares with respect to
which such Option or portion is exercised;
(ii) With the consent of the Committee, payment delayed
for up to thirty (30) days from the date the Option, or portion thereof,
is exercised; or
(iii) With the consent of the Committee, (A) shares of the
Company's Common Stock owned by the Optionee duly endorsed for transfer
to the Company or (B) subject to the timing requirements of Section 4.4,
shares of the Company's Common Stock issuable to the Optionee upon
exercise of the Option, with a Fair Market Value on
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the date of Option exercise equal to the aggregate purchase price of the
shares with respect to which such Option or portion is exercised; or
(iv) With the consent of the Committee, property of any
kind which constitutes good and valuable consideration; or
(v) With the consent of the Committee, a full recourse
promissory note bearing interest (at no less than such rate as shall
then preclude the imputation of interest under the Code or successor
provision) and payable upon such terms as may be prescribed by the
Committee or the Board. The Committee may also prescribe the form of
such note and the security to be given for such note. The Option may not
be exercised, however, by delivery of a promissory note or by a loan
from the Company when or where such loan or other extension of credit is
prohibited by law; or
(vi) With the consent of the Committee, any combination of
the consideration provided in the foregoing subparagraphs (iii), (iv)
and (v); and
(c) A bona fide written representation and agreement, in a form
satisfactory to the Committee or the Board, signed by the Optionee or other
person then entitled to exercise such Option or portion, stating that the shares
of stock are being acquired for his own account, for investment and without any
present intention of distributing or reselling said shares or any of them except
as may be permitted under the Securities Act and then applicable rules and
regulations thereunder, and that the Optionee or other person then entitled to
exercise such Option or portion will indemnify the Company against and hold it
free and harmless from any loss, damage, expense or liability resulting to the
Company if any sale or distribution of the shares by such person is contrary to
the representation and agreement referred to above. The Committee may, in its
absolute discretion, take whatever additional actions it deems appropriate to
insure the observance and performance of such representation and agreement and
to effect compliance with the Securities Act and any other federal or state
securities laws or regulations. Without limiting the generality of the
foregoing, the Committee may require an opinion of counsel acceptable to it to
the effect that any subsequent transfer of shares acquired on an Option exercise
does not violate the Securities Act, and may issue stop-transfer orders covering
such shares. Share certificates evidencing stock issued on exercise of this
Option shall bear an appropriate legend referring to the provisions of this
subsection (c) and the agreements herein. The written representation and
agreement referred to in the first sentence of this subsection (c) shall,
however, not be required if the shares to be issued pursuant to such exercise
have been registered under the Securities Act, and such registration is then
effective in respect of such shares; and
(d) Full payment to the Company (or other employer corporation)
of all amounts which, under federal, state or local tax law, it is required to
withhold upon exercise of the Option; with the consent of the Committee, (i)
shares of the Company's Common Stock owned by the Optionee duly endorsed for
transfer, or (ii) subject to the timing requirements of Section 4.4, shares of
the Company's Common Stock issuable to the Optionee upon exercise of the Option,
having a Fair Market Value at the date of Option exercise equal to the sums
required to be withheld, may be used to make all or part of such payment; and
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(e) In the event the Option or portion shall be exercised
pursuant to Section 4.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise the Option.
Section 4.4 - Certain Timing Requirements
Shares of the Company's Common Stock issuable to the Optionee
upon exercise of the Option may be used to satisfy the Option price or the tax
withholding consequences of such exercise only (i) during the period beginning
on the third (3rd) business day following the date of release of the quarterly
or annual summary statement of sales and earnings of the Company and ending on
the twelfth (12th) business day following such date or (ii) pursuant to an
irrevocable written election by the Optionee to use shares of the Company's
Common Stock issuable to the Optionee upon exercise of the Option to pay all or
part of the Option price or the withholding taxes (subject to the approval of
the Committee) made at least six (6) months prior to the payment of such Option
price or withholding taxes.
Section 4.5 - Conditions to Issuance of Stock Certificates
The shares of stock deliverable upon the exercise of the Option,
or any portion thereof, may be either previously authorized but unissued shares
or issued shares which have then been reacquired by the Company. Such shares
shall be fully paid and nonassessable. The Company shall not be required to
issue or deliver any certificate or certificates for shares of stock purchased
upon the exercise of the Option or portion thereof prior to fulfillment of all
of the following conditions:
(a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed; and
(b) The completion of any registration or other qualification of
such shares under any state or federal law or under rulings or regulations of
the Securities and Exchange Commission or of any other governmental regulatory
body, which the Committee or Board shall, in its absolute discretion, deem
necessary or advisable; and
(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Committee or Board shall, in its
absolute discretion, determine to be necessary or advisable; and
(d) The receipt by the Company of full payment for such shares,
including payment of all amounts which, under federal, state or local tax law,
it is required to withhold upon exercise of the Option; and
(e) The lapse of such reasonable period of time following the
exercise of the Option as the Committee or Board may from time to time establish
for reasons of administrative convenience.
Section 4.6 - Rights as Shareholder
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The holder of the Option shall not be, nor have any of the rights
or privileges of, a shareholder of the Company in respect of any shares
purchasable upon the exercise of any part of the Option unless and until
certificates representing such shares shall have been issued by the Company to
such holder.
ARTICLE V
OTHER PROVISIONS
Section 5.1 - Administration
The Committee shall have the power to interpret the Plan and this
Agreement and to adopt such rules for the administration, interpretation and
application of the Plan as are consistent therewith and to interpret or revoke
any such rules. All actions taken and all interpretations and determinations
made by the Committee in good faith shall be final and binding upon the
Optionee, the Company and all other interested persons. No member of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Option. In its
absolute discretion, the Board may at any time and from time to time exercise
any and all rights and duties of the Committee under this Plan except with
respect to matters which under Rule 16b-3 or Section 162(m) of the Code, or any
regulations or rules issued thereunder, are required to be determined in the
sole discretion of the Committee.
Section 5.2 - Option Not Transferable
Neither the Option nor any interest or right therein or part
thereof shall be liable for the debts, contracts or engagements of the Optionee
or his successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that this Section 5.2
shall not prevent transfers by will or by the applicable laws of descent and
distribution.
Section 5.3 - Shares to Be Reserved
The Company shall at all times during the term of the Option
reserve and keep available such number of shares of stock as will be sufficient
to satisfy the requirements of this Agreement.
Section 5.4 - Notices
Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Secretary, and any
notice to be given to the Optionee shall be addressed to him at the address
given beneath his signature hereto. By a notice given pursuant to this Section
5.4, either party may hereafter designate a different address for notices to
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be given to him. Any notice which is required to be given to the Optionee shall,
if the Optionee is then deceased, be given to the Optionee's personal
representative if such representative has previously informed the Company of his
status and address by written notice under this Section 5.4. Any notice shall be
deemed duly given when enclosed in a properly sealed envelope or wrapper
addressed as aforesaid, deposited (with postage prepaid) in a post office or
branch post office regularly maintained by the United States Postal Service.
Section 5.5 - Titles
Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.
Section 5.6 - Construction
This Agreement shall be administered, interpreted and enforced
under the laws of the State of Maryland.
Section 5.7 - Conformity to Securities Laws
The Optionee acknowledges that the Plan is intended to conform to
the extent necessary with all provisions of the Securities Act and the Exchange
Act and any and all regulations and rules promulgated by the Securities and
Exchange Commission thereunder, including without limitation Rule 16b-3.
Notwithstanding anything herein to the contrary, the Plan shall be administered,
and the Option is granted and may be exercised, only in such a manner as to
conform to such laws, rules and regulations. To the extent permitted by
applicable law, the Plan and this Agreement shall be deemed amended to the
extent necessary to conform to such laws, rules and regulations.
[Signature Page to Follow]
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IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties hereto.
Sunterra Corporation
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By:
Its:
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By:
Its:
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Optionee
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Address
Optionee's Taxpayer
Identification Number:
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